British Airways parent IAG hit by huge losses but eyes return to post-Covid profit

First-quarter losses were much worse than predicted because of staffing and reliability problems

British Airways is cutting capacity on its summer schedule by 5 per cent to reduce cancellations and delays as parent company IAG eyes a post-pandemic recovery from heavy losses towards profit for the rest of the year.

The flag carrier struggled to cope with staff shortages at the start of this year, compounded by ongoing IT problems, just as passengers returned in large numbers following the end of Covid regulations.

Shares in IAG, which also owns Iberia, Vueling and Aer Lingus, slumped 8 per cent in early trading, making it the worst-performing FTSE100 stock.

However, the firm said a recovery in business travel and trips by wealthy passengers will drive a return to profitability from the second quarter onwards.

Chief executive Luis Gallego said the cost of dealing with the BA disruption was the main reason why first-quarter operating losses were €754m – much worse than analyst forecasts of €510m.

The company has lowered its full-year group capacity guidance to around 80 per cent of 2019 levels – down from 85 per cent – “to give more stability for the summer”, Mr Gallego said.

“Demand is recovering strongly in line with our previous expectations,” he added. “Premium leisure continues to be the strongest performing segment and business travel is at its highest level since the start of the pandemic.”

Capacity on routes across the north Atlantic will be “close to fully restored” between July and September, Mr Gallego said.

BA has cancelled thousands of flights in recent weeks due to staff shortages and sickness.

Mr Gallego added: “Globally the travel industry is facing challenges as a result of the biggest scaling up in operations in history, and British Airways is no exception. The welcome removal of UK’s stringent travel restrictions, combined with strong pent-up demand, have contributed to a steep ramp-up in capacity.”

British Airways has reduced short-haul flights to give “confidence to the customer and stability to the programme”, he said.

Chief executive Luis Gallego says ‘demand is recovering strongly’ (PA)

The rate of staff absences at BA in previous months has been around 7 per cent, compared with 4-5 per cent normally.

Mr Gallego said the airline has enough pilots but is suffering a “big problem” recruiting for ground handling roles.

An average of 103 days to check the references of new recruits in recent months so they could start work “didn’t help”, he added.

“That’s something around 20 per cent higher than the numbers we had before.”

He attributed the delay to many people having gaps or changes in their employment history caused by Covid-19.

The chief executive also accused Heathrow of underestimating passenger numbers, which means there is a “lack of resources” at the airport.

This makes it “impossible to operate the capacity that we have in our minds”, he claimed.